There are many common mistakes that companies make in their commercial practices that may seem like a good idea at the time, but could be causing significant negative impact to their business operations or project outcomes over the long term. Could you be committing one or more of these mistakes on your project?
These are the top 10 destructive commercial practices to avoid on your projects. While many make these mistakes, you’re best to avoid them. Let’s take a look at what the top mistakes are and why they’re a bad idea.
- Hiding the risk: Misleading contract terms don’t help. If you’re being bounced around the contract to get to the true allocation of risk, it’s probably time to revise the drafting.
- Risk offloading: Passing all risks off to the supply chain may seem like a good idea, but the reality is those risks don’t go away. Chances are you’ve either paid a premium for those risks or laid the groundwork for a prolonged period of dispute.
- Failing to give notices – Give the employer the choice, don’t wait for the decision to be de facto. Employers, deafening silence will not resolve an issue, you may not agree with the Contractor’s position but you must reply and explain why not
- Under-pricing: Why back yourself into a corner? Price as honestly as possible and discuss the obstacles you face and any potential optimisations. One day the tide may go out and everyone will see that you’ve been swimming naked…
- Short tender periods: “We would like you to price this $1B lump sum contract inside four weeks”. Always allow enough time for the bid, and if you are up against it time-wise pick a contract form that allows for the increased uncertainty.
- Deceptive and poor planning: One example includes ‘the two-programme scam’ (one for the contract and one for construction). Don’t do it! It creates work, leads to mistrust and when push comes to shove the truth will come out.
- Poor record keeping: Not knowing what happened isn’t good (unless you’ve been out with Keith Richards). Keep track of resources so you can improve efficiency and demonstrate entitlement.
- Over reliance on the relationship: It’s good to have a collaborative working relationship but this can go too far if nothing is documented. Document your heated agreements just in case your marriage made in heaven ends in divorce.
- Emotional attachment to an Issue: Always remember that it’s just business. It’s harder to resolve an issue if you’re emotionally attached, and a skilled negotiator will use your weight of feeling against you. For example, you may inadvertently give up higher valued items just to win that one low value point of principle.
- Emotional & Evocative language (particularly in letter writing): One of the few joys of forensic research is seeing the war of words deteriorate into mud throwing through the course of contractual correspondence. Whilst the insults and animosity can be mildly amusing to the third party reviewing the letters, it’s probably not a good idea if you really want to solve the issue.
If you can avoid these ten common commercial practice blunders across your projects, contracts and delivery of work, you’re likely to benefit in a number of ways.
From reduced risk, higher predictability and less avoidable costs to a better customer experience and a stronger reputation in your industry as a result, your project outcomes, client satisfaction and overall stress levels all stand to benefit when you avoid the temptation of these common destructive mistakes and shortcuts.
Want more advice about how you run your projects? Get in touch with our team of experts to chat about your projects and how we can help today, or read more handy advice here on our blog.